Eastman Kodak Crushed Again, a Reminder of the Struggles of Bill Miller

By Mark Gongloff

Bloomberg

Bill Miller

Eastman Kodak shares are down nearly 25% today after the hard-luck company reported tapping a credit line for cash. Apparently nobody uses film any more.

Hopefully that message is at long last getting through to one of the company’s biggest fans, value-investment legend Bill Miller. As of the end of June, Mr. Miller’s Legg Mason Capital Management was the top institutional holder of Eastman Kodak, and it was Mr. Miller’s fourth-largest holding as of the end of June.

Mr. Miller has been selling Kodak shares off and on for years, but probably not quickly enough. He has been taking a beating on them for more than a decade now.

He started building a big position in the company in the second quarter of 2000, when the stock fell from nearly $60 a share to about $41.

He continued to buy up Kodak shares through the end of 2003, by which time the stock had fallen to about $25.

He built his biggest position of all, about 61 million shares, by the second quarter of 2008, when the stock had dropped to about $15. He has since whittled his position down to about 19 million shares. The stock recently traded at $1.78.

When he finally seemed to really start throwing in the towel, selling a big chunk of Kodak from his flagship fund in the first quarter of 2011, Bloomberg wrote this about his investment:

Legg Mason Capital Management Value Trust, run by Miller since 1982, disclosed in a semi-annual report last week that the fund sold 18.2 million Kodak shares late last year and during this year’s first quarter for about $3.89 each on average. The fund realized a $551 million loss through the divestiture, according to the report.

Miller…began loading up on Kodak shares in 2000 and, by the end of 2005, his firm owned as much as 25 percent of the Rochester, New York, company. Value Trust, one of several Legg Mason funds and accounts to hold Kodak stock, kept the bulk of its stake for more than a decade, only to sell after the film company had lost more than 90 percent of its market value.

“Part of it was just this mentality that this was just a temporary setback and Kodak would be able to get quickly back on track,” said Bridget Hughes, an analyst at Morningstar Inc., a Chicago-based stock and fund research firm. “It was not only a mistake, it was also causing a lot of client angst.”

Eastman Kodak is still the biggest holding of Mr. Miller’s Legg Mason Capital Management Opportunity Trust, performance of which has plunged 37% this year, trailing 99% of its peers.

Comments (5 of 13)

Well Well all you doubters. I was talking with a "friend" who works for apple in the patent area and they have a deal that will blow EK stock into the stratosphere. He probably shouldnt have told me but he did. I ust bout about 40000 shares and at 65 cents you will get 5 times your money very shortly and you wont even have to buy put options to do it. The kodak name is huge and they are going to not only eliminate the 2 billion they will owe them in September 2012 but they will get all the patents that Kodak owns. So Apple will also not have to pay FUTURE fees for use of the patents. This will happen right after apple cashes in on Christmas sales. Praise God if I had mor emoney I would buy more.

3:28 pm October 3, 2011

Sandeep Pratap Singh wrote :

Put some confidence. Shares will rise after this recession. Some outside money pumping an the reshuffling of management is needed. It's an obvious sign that shining offices absorbs more heat, when the air conditioning fails. Kodak is standing where they were, but the rivals beat them by transforming the upper hand by made in China stuffs with Electronics of Japan, nevertheless the obligations of L-P-G...
Stakeholders must have to show the solidarity for sometime more, it will rise to some comfort level again...

12:05 pm September 27, 2011

Gearhead wrote :

Luria,
So you're saying EK is really worth much more but the share price is being manipulated? How so?

10:23 am September 27, 2011

H. Luria wrote :

Further, Miller has had some super snap back years, like 2009, but what has happened to him and us all is: We're no longer in a place of investment (the stock market) we're in a casino, and a crooked one too.

10:18 am September 27, 2011

H. Luria wrote :

I have owned Miller's funds for over a decade, and I keep telling myself that Babe Ruth had slumps too, but now I'm scared and trapped.

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